Australia raises key interest rate to 4% on recovery

Australia’s central bank resumed raising interest rates after a one-meeting pause, judging that faster-than-anticipated economic growth will allay concerns that European deficits may roil global confidence. Reserve Bank of Australia Governor Glenn Stevens increased the benchmark overnight cash rate target to 4 percent from 3.75 percent in Sydney today, as forecast by 14 of 19 economists in a Bloomberg News survey. The rest saw no change. Stevens said rates should be closer to “average,” which he last week signaled may be 75 basis points higher than today’s new level. The biggest jobs boom in more than three years and a surge in business confidence suggest Australia’s economy is already growing at or close to trend, after escaping recession during the global crisis, Stevens said. Today’s decision indicated the economic figures outweighed concerns about global sovereign debt risks, which helped convince the RBA to stand pat last month. “It seems they are determined to deliver a rate hike every couple of months or so,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. Still, there is enough global risk “out there that they’d want to be a bit cautious about” another move in April, he added. The RBA paused last month after sovereign-debt risks sparked by Greece sent the euro and emerging stock markets tumbling.

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